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USD/CAD at Risk of Breakdown as Oil Gains, Canadian Dollar Outlook Bullish for Now

USD/CAD at Risk of Breakdown as Oil Gains, Canadian Dollar Outlook Bullish for Now

Diego Colman, Contributing Strategist


  • USD/CAD deepens pullback as market mood improves and oil extends its recovery
  • The Canadian dollar retains a constructive technical outlook for now
  • High-beta currencies, however, remain in a vulnerable position and sensitive to changes in global sentiment following the recent turmoil in the U.S. banking sector
Data provided by
of clients are net long. of clients are net short.
Change in Longs Shorts OI
Daily 12% 2% 5%
Weekly -15% 43% 15%
What does it mean for price action?
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Most Read: US Dollar Outlook: Path of Least Resistance is Lower after Fed Ditches Hawkish View

The Canadian dollar has strengthened against the U.S. dollar in recent days amid improving mood and a dovish repricing of the Fed’s monetary policy outlook following the fallout from the turmoil in the U.S. banking sector, which led to the failure of two mid-sized regional lenders earlier this month (SVB and SBNY).

The loonie has also benefited from the recovery in energy markets, with crude oil up around 15% from its March 20 lows in response to supply disruption risks in the Middle East. Canada is a major hydrocarbon exporter, so the country's currency tends to appreciate when fossil fuel prices rise due to better terms of trade.

Against this backdrop, USD/CAD has fallen more than 1.2% this week and currently trades near the 1.3575 level, with the exchange rate exhibiting a modest bearish tone on Wednesday amid risk-on bias on Wall Street.

With demand for safe-haven assets waning and key commodities rebounding, the Canadian dollar may have more upside in the near term, but the broader high-beta FX space will remain in a vulnerable position and sensitive to changes in global sentiment, which could sour in the blink of an eye.

From a technical perspective, USD/CAD has been retreating towards a key floor in the 1.3540-1.3520 area near the 50-day simple moving average. If sellers manage to push the pair below this region and achieve a decisive breakdown, selling momentum could accelerate, paving the way for a drop toward trendline support at 1.3430.

On the flip side, if buyers regain control of the market and spark a meaningful bullish reversal, initial resistance rests around the psychological 1.3700 handle. On a topside breakout, the focus shifts to the 2023 high just a touch below 1.3865.

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Chart, histogram  Description automatically generated

USD/CAD Technical Chart Prepared Using TradingView

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.